Tenants in Germany’s biggest city can heave a sigh of relief as the Berlin government has approved a policy freezing rents for the next five years to clamp down on surging housing costs.
The Senate of Berlin, the executive body governing the city which is also a federal state, on Tuesday (22 October) approved a bill to freeze rents for five years, beginning from 2020.
Highlights of the policy are:
- Rents are to be frozen from the beginning of 2020 for five years at the level of 2013. Buildings built from 2014 are exempted from the regulation
- Landlords can charge an annual inflation-linked rent increase of 1.3% from 2022
- Rates in new tenancy agreements should not be higher than the old ones. If higher, then the upper limit provided in the city’s rent index (Mietspiegel) applies. For example, low rents of less than five euros per square meter may be increased by a maximum of one euro per square meter to a maximum of five euros per square meter.
- Renovation costs could be reflected in rent increase by a maximum of one euro per square meter. Renovation with a surcharge of two euros per square meter must be approved.
The provision that the upper limits of rents should not be higher than 20 per cent over the 2013 level means that tenants paying excessively high rents could claim a reduction under certain conditions. Hundreds of thousands of apartments could be affected, according to the Berlin government.
The rent-cap decision was taken by Berlin’s governing parties (SPD, the Left party and Greens) in reaction to the outcry of residents who have gone to the streets in their thousands several times in recent years to protest the ever-increasing rent in the city, which has pushed many to the edge of desperation.
Rents have risen by more than 100 per cent in some parts of the metropolis in the past ten years while incomes for most workers have not risen by up to 20 per cent during the same period.
While tenants are happy over the development, real estate developers have sharply criticised the policy with some threatening to go to court to seek its reversal. Berlin’s Governing Mayor Michael Mueller said he’s confident the policy would withstand legal challenges.
Other critics of the Berlin move say it would discourage new investment which will make the problem of lack of apartments worse. They say the only way to avoid further rent increases is to build enough properties to keep pace with demand.
Other cities in Germany could follow in Berlin’s footsteps, say analysts. For example, tenants’ groups in Munich are pushing for a six-year freeze and the city’s mayor is reported to be sympathetic to the demand. However, cities, such as Hamburg, have openly opposed a rent cap policy.
The new policy, which is still a bill, has to be passed by the city’s parliament to become law. This is however a formality as the government parties have a clear majority of 92 members in the 160-member parliament.
The law is expected to enter into force at the beginning of 2020.